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Global investors seem to be getting increasingly wary of putting their money in the India market. According to the latest Bank of America Merrill Lynch (BofA ML) fund manager survey, allocations towards India have fallen to a 11-month low.

“It is... notable that the allocation to India fell to an 11-month low (net 11% underweight),” notes the survey for emerging market (EM) and Asian economies, while highlighting the point that investors’ risk appetite and EM equity prices have both steadily improved over the last six months. Interestingly, the fall in confidence comes only a month after India had managed to grab the pole position in terms of the most favourite investment destination.

The findings of the survey also coincide with the period when FIIs have slowed down their India investments. In October, FIIs invested slightly less than $2 billion in Indian equities, which was much less than that of September when foreign investors pumped in nearly $3.9 billion. In November, FIIs have been net buyers at only $532 million.

The fall in India allocation is accompanied by a record rise in confidence levels towards China. “... a majority of investors (net 51%) now expect Chinese growth will expand over the next 12 months — the highest level since January 2010,” said the report, adding that the stronger-than-expected Chinese macro data over the last month has improved investor confidence. While the survey has showed that global asset allocators increased their allocation to EM equities for the second straight month, it says that further improvement in risk appetite may be limited until policymakers deliver a credible resolution to the biggest tail risk, the Fiscal Cliff.

In terms of sector allocations, EM fund managers reduced their sector bets across the board in November. “Even beloved consumer discretionary was trimmed. Despite the big pick-up in China growth expectations and risk appetite, resources are still the least-favorite trade,” says the report.